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A scissors effect on the forecasted realizations

Despite its extensive distribution network (25 branches), ENNAKL AUTOMOBILES is today confronted with fiscal and regulatory pressures augmented by exacerbated competition, induced by:

• The 10% drop in import quotas in 2017 and 20% in 2018, slowing the flow of the operator;
• The increase of (i) consumer rights by 25%, (ii) customs duties by 10% -15% and (iii) VAT by 1% in 2018, leading to higher vehicle prices and contributing to the expansion of the parallel market (representing 24% of global sales at the end of 2017);
• The development of local assembly which is not subject to import tariffs:
• The authorization of the Tunisian Government to introduce new brands, reducing the market share of historic distributors including ENNAKL AUTOMOBILES;
• The launch by the authorities of the new offer "popular car" won by the Chinese, eroding significant market shares from distributors;
• And, the depreciation of the Tunisian Dinar relative to the Euro and the Dollar, raising vehicle prices.

These various constraints should continue to affect the automotive operator’s income in 2018. Its 2019 achievements would not appreciate as they should be subject to the transition of the Income Tax rate from 25% to 35%.

While waiting for the impact of the automotive operator's activity diversification towards the second-hand car segment and the concretization of its ambition to develop a CKD (Complete Knock Down) activity, we recommend selling the share.